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We are a leader in the specialty coffee and coffeemaker businesses in the United States and Canada. We sell KeurigÂ® Single Cup brewers and roast high-quality Arabica bean coffees including single-origin, Fair Trade Certifiedâ„˘, certified organic, flavored, limited edition and proprietary blends offered in K-CupÂ® and VueÂ® packs ("portion packs") for use with our KeurigÂ® Single Cup brewers. We also offer traditional whole bean and ground coffee in other package types including bags, fractional packages and cans. In addition, we produce and sell other specialty beverages in portion packs including hot apple cider, hot and iced teas, iced coffees, iced fruit brews, hot cocoa and other dairy-based beverages. Unless the context indicates otherwise, the terms "GMCR", the "Company", "we", "our", or "us" refer to Green Mountain Coffee Roasters, Inc., together with its subsidiaries.

As of the end of our 2013 fiscal year, we had the top four coffeemakers by dollar volume in the United States according to the NPD Group for consumer market research data. Under the KeurigÂ® brand name, we offer a variety of brewers for commercial use in the Away From Home ("AFH") channel and for home use in the At Home ("AH") channel that are differentiated by features and size.

Over the last several years the primary growth in the coffee industry has come from the specialty coffee category, including demand for single serve coffee which can now be enjoyed in a wide variety of places, including home, office, professional, restaurants, and hospitality locations. This growth has been driven by the emergence of specialty coffee shops throughout the U.S. and Canada, the general level of consumer knowledge of, and appreciation for, coffee quality and variety, and the wider availability of high-quality coffee. The Company has been benefiting from this overall industry trend in addition to what we believe to be our carefully developed and distinctive advantages over our competitors.

Our growth strategy involves developing and managing marketing programs to drive KeurigÂ® Single Cup brewer adoption in order to generate ongoing demand for portion packs in American and Canadian households, foodservice and office location and, in the longer term, globally. As part of this strategy, we work to sell our AH brewers at attractive price points which are approximately at cost, or sometimes at a loss when factoring in the incremental costs related to sales, in order to drive the sales of profitable portion packs. In addition, we have license agreements with Breville PTY Limited (producer of BrevilleÂ® brand coffeemakers), Jarden Consumer Solutions (producer of Mr. CoffeeÂ® brand coffeemakers), and Conair Corporation (producer of CuisinartÂ® brand coffeemakers), under which each produce, market and sell coffeemakers co-branded with KeurigÂ®.

In recent years, our growth has been driven predominantly by the growth and adoption of KeurigÂ® Single Cup Brewing systems, which include both the brewer and the related portion packs. In fiscal 2013, approximately 92% of our consolidated net sales were attributed to the combination of portion packs and KeurigÂ® Single Cup brewers and related accessories.

Acquisitions and Divestitures

In fiscal 2011, we acquired LJVH Holdings Inc. ("Van Houtte") owner of Van HoutteÂ® and other brands, based in Quebec, Canada. This acquisition is providing growth opportunities for us, particularly in Canada, and we believe is further advancing our objective of becoming a leader in the competitive coffee and coffeemaker business in the U.S. and Canada.

On October 3, 2011, we sold the Van Houtte U.S. Coffee Service business, or "Filterfresh" business, to ARAMARK Refreshment Services, LLC ("ARAMARK").

Business Segments

Our operating structure consists of two business segments. We historically managed our operations through three business segments: the Specialty Coffee business unit ("SCBU"), the Keurig business unit ("KBU") and the Canadian business unit. Effective as of and as initially disclosed on May 8, 2013, our Board of Directors authorized a reorganization which consolidated U.S. operations to bring greater organizational efficiency and coordination across the Company. Due to this combination, the results of U.S. operations, formerly reported in the SCBU and KBU segments, are reported in the Domestic segment and the results of Canadian operations are in the "Canada" segment. See Note 4, Segment Reporting , of the Notes to Consolidated Financial Statements included in this Annual Report.

Domestic. The Domestic segment sells single cup brewers and accessories, and sources, produces and sells coffee, hot cocoa, teas and other beverages in portion packs and coffee in more traditional packaging including bags and fractional packs to retailers including supermarkets, department stores, mass merchandisers, club stores, and convenience stores; to restaurants, hospitality accounts, office coffee distributors, and partner brand owners; and to consumers through Company websites.

Canada. The Canada segment sells single cup brewers, accessories, and sources, produces and sells coffee, teas and other beverages in portion packs and coffee in more traditional packaging including bags, cans and fractional packs under a variety of brands to retailers including supermarkets, department stores, mass merchandisers, club stores, through office coffee services to offices, convenience stores, restaurants, hospitality accounts, and to consumers through its website.

Business Relationships

Our business relationships with participating brands are generally established through licensing or manufacturing arrangements.

Under licensing arrangements , we license the right to manufacture, distribute and sell the finished products through our distribution channels using the brand owners' marks. For the right to use a brand owner's mark, we pay a royalty to the brand owner based on our sales of finished products that contain the brand owner's mark.

Under manufacturing arrangements , we manufacture finished beverage products using raw materials sourced by us or provided by the brand owner. In both instances, once the manufacturing process is complete, we sell the finished product either to the brand owner or to our customers. Under certain manufacturing arrangements, our sole customer is the brand owner and we are prohibited from selling the beverage products to other types of customers through our distribution channels. Under other manufacturing arrangements, in addition to manufacturing the beverage for sale to the brand owner, we have the right to sell the beverages using the brand owner's marks in certain of our channels through a licensing arrangement, as described above.

Our Strengths

We believe our system approach provides us with a unique competitive advantage in the marketplace, as we design all aspects of the system, including the beverage, the portion pack, the portion pack manufacturing lines, the appliance and its components. We believe that the consumer benefits delivered by our KeurigÂ® beverage system will preserve our leadership position in the marketplace and give us significant opportunity to continue to grow our coffee business and do for other beverage categories what we have done for coffee.

We believe the primary consumer benefits delivered by our KeurigÂ® Single Cup Brewing system are as follows:

1
Qualityâ€”expectations of the quality of coffee consumers drink have increased over the last several years and, we believe, with the KeurigÂ® system, consumers can be certain they will get a high-quality, consistently produced beverage every time.

2
Convenienceâ€”the KeurigÂ® system prepares beverages generally in less than a minute at the touch of a button with no mess, no fuss.

3
Choiceâ€”with many beverage brands across multiple beverage categories, GMCR offers more than 290 individual varieties, allowing consumers to enjoy and explore a wide range of beverages. In addition to a variety of brands of coffee and tea, we also produce and sell iced teas, iced coffees, hot and iced fruit brews, hot cocoa and other dairy-based beverages, in portion packs.

We see these benefits as being our competitive advantage and believe it's the combination of these attributes that make the KeurigÂ® Single Cup Brewing system appealing to consumers.

Our Strategy

We are focused on building our brands and profitably growing our business. We believe we can continue to grow sales by increasing consumer awareness in the U.S. and Canada, expanding into new geographic regions, expanding consumer choice of coffee, tea and other beverages in our existing brewing systems or through the introduction of new brewing platforms, expanding sales in adjacent beverage industry segments and/or selectively pursuing other synergistic opportunities.

The key elements of our business strategy are as follows:

â€˘
Growing the current KeurigÂ® Hot system in the U.S. and Canada;

â€˘
Expanding our brand offerings, both owned and partner brands;

â€˘
Expanding in current channels;

â€˘
Launching new brewer technologies and innovation;

â€˘
Beginning international expansion.

Growing the current KeurigÂ® Hot system in the United States and Canada. While we are positioned as a leader in the single serve hot beverage marketplace, we estimate our current KeurigÂ® Hot system is only in approximately 13% of U.S. households. In order to increase household penetration, we are executing a segmentation strategy to effectively showcase our extensive variety of beverage options. We are also implementing measures to improve the shopping experience at retail to further distinguish the KeurigÂ® brand and enhance brand recognition. Additionally, we are launching targeted marketing campaigns to increase regional household penetration in certain geographic areas through increased awareness, trial and conversion.

Expanding our brand offering. In fiscal 2013, we have continued to expand consumer choice in the KeurigÂ® Single Cup Brewing system by entering into or extending a number of business relationships which enable us to offer other strong national and regional coffee and tea brands, and store brands such as Dunkin' Donuts TM , Seattle's Best CoffeeÂ®, StarbucksÂ®, The Coffee Bean & Tea LeafÂ® , CinnabonÂ®, TazoÂ®, Eight O'ClockÂ®, TetleyÂ®, Good EarthÂ®, SnappleÂ®, Kirkland Signature TM and METRO's Irresistibles K-CupÂ® packs for use with KeurigÂ® Single Cup brewers. We also continue to examine opportunities for business relationships with other strong national/regional brands including the potential for adding premium store-brand or co-branded portion packs to create additional single serve products that will help augment consumer demand for the KeurigÂ® Single Cup Brewing systems. Furthermore, we are expanding the use of our KeurigÂ® Single Cup Brewing system beyond beverages through innovative partnerships, the first of which is with the Campbell Soup Company to produce Campbell's Fresh-Brewed Soup K-CupÂ® packs which we expect to be available in fiscal 2014. We believe these new product offerings fuel excitement for current KeurigÂ® Single Cup brewer owners and users; raise system awareness; attract new consumers to the system; and promote expanded use of the system. These relationships are established with careful consideration of potential economics. We expect to continue to enter into these relationships in our efforts to expand choice and diversify our portfolio of brands with the expectation that they will lead to increased KeurigÂ® Single Cup Brewing system awareness and household adoption, in part through the participating brand's advertising and merchandising activities. In addition to entering into business relationships with brands that are new to the KeurigÂ® Single Cup Brewing system, we expect to be able to convert a number of unlicensed brands to the KeurigÂ® system on a licensed basis.

Expanding in current channels. We have identified and are targeting specific opportunities within our existing channels, specifically the AFH channel, including food service, workplace, higher education and hospitality locations. These are areas where KeurigÂ® has substantial room to grow, considering we are currently in less than one percent of food service outlets.

Launching new brewer technologies and innovation. We are also focused on continued innovation in both hot and cold single serve brewing systems. Some of our recent initiatives and planned product introductions include:

â€˘
An expansion of the KeurigÂ® Hot system with the fiscal 2013 launch of the KeurigÂ® Rivoâ„˘ Cappuccino and Latte System and Rivoâ„˘ pack espresso blend varieties, in partnership with Luigi Lavazza S.p.A. ("Lavazza");

An expansion of the KeurigÂ® Hot system with introduction of a new commercial grade KeurigÂ® Boltâ„˘ platform which, following in-office testing, will be available throughout the U.S. and Canada beginning in the first half of fiscal 2014;

â€˘
An introduction of the next generation beverage platform of the KeurigÂ® Hot beverage system, which will combine the qualities and technologies of our existing K-CupÂ® and VueÂ® platforms to offer a wider array of beverages and available sizes, with an estimated launch in late fiscal 2014; and

â€˘
An estimated launch in fiscal 2015 of the KeurigÂ® Cold system, which will deliver freshly prepared carbonated, sparkling and still beverages.

Beginning international expansion. Beginning in fiscal 2014 and continuing into fiscal 2015, we are planning to launch our KeurigÂ® Hot system global platform with the introduction of a specifically designed KeurigÂ® Single Cup brewer, in the United Kingdom, Australia, South Korea, and Sweden.

Corporate Objective and Philosophy

Our Company's objective is to be a leader in the beverage business by selling high-quality, premium beverages and innovative brewing systems that consistently provide a superior beverage experience. Increasingly, we are also developing expertise in providing other brewing system choices.

Our purpose: "Create the ultimate beverage experience in every life we touch from source to cupâ€”transforming the way the world understands business" guides our approach to business.

Essential elements of our philosophy and approach include:

High-Quality Coffee. We are passionate about roasting great coffees and are committed to ensuring that our customers have an outstanding coffee experience. We buy some of the highest-quality Arabica beans available from the world's coffee-producing regions and use a roasting process designed to optimize each coffee's individual taste and aroma.

Innovative Brewing Technology. Our proprietary brewing technology, embodied in our portfolio of premium quality machines and portion packs, provides the benefits of convenience, variety and great taste consistently from cup to cup. The KeurigÂ® Single Cup Brewing systems include the following elements:

â€˘
Premium quality brewers that precisely control the amount, temperature and pressure of water to provide a cup of coffee, tea, cocoa or other beverage of a consistent high quality when used with our own or licensed portion packs.

â€˘
Convenience of one-touch brewing which allows consumers to enjoy the perfect cup simply and quickly, in some cases in less than a minute.

While the brewing system has been designed and optimized for producing consistent, high-quality coffee, we have expanded our beverage selection to include other beverages such as hot apple cider, hot cocoa, brew-over-ice teas, coffees and fruit brews. We believe these new beverages will help to increase brewer usage occasions and enhance consumer satisfaction. New beverage development work has also generated proprietary know how and/or patent applications. The Company holds U.S. and international patents covering a range of its portion pack and brewing technology innovations, with additional patent applications in process. We believe our constant innovation and focus on quality, all directed to delivering a consistently superior cup of coffee, are what differentiates us among competitors in the coffeemaker industry.

Product Distribution. The Company seeks to create customers for life. We believe that coffee and other beverages are convenience purchases, and we utilize our multi-channel distribution network of distributor, retail and consumer direct options to make our products widely and easily available to consumers.

Sustainable Business Practices. We view sustainability as integral to our success. We have a long history of supporting sustainability initiatives, particularly where we have business interest or expertise. We strive to manage and minimize negative impacts throughout the value chain where possible and have three sustainable business practice areas where we define goals and measure our progress: Resilient Supply Chain, Sustainable Products, and Thriving People and Communities. We allocate a portion of our profits towards philanthropic and sustainability efforts. To learn more about our programs visit www.gmcr.com/sustainability.aspx.

Corporate Culture. Our Code of Ethics is an important part of our culture and is applicable to all of our employees and our Board of Directors. The Code of Ethics is posted on our corporate website. In addition, we believe the Company has a highly inclusive and collaborative work environment that encourages employees' individual growth and personal awareness through a culture of personal accountability and continuous learning.

CEO BACKGROUND

At the Annual Meeting, three individuals are to be elected as Class II Directors to hold a three-year term of office from the date of their election until the 2016 Annual Meeting and until their successors are duly elected and qualified.

The three nominees for election as Class II Directors are Barbara D. Carlini, Hinda Miller and Norman H. Wesley, each of whom is currently a Class II Director and each of whom has agreed to serve as a Director if elected.

If a nominee for Director is unable to serve as a Director, the persons appointed as the Proxy Committee for the Annual Meeting may, in their discretion, vote for another person as Director or vote to reduce the number of Directors to less than ten, as the Board may recommend.

See the section of this proxy statement entitled â€śSecurity Ownership of Certain Beneficial Owners and Managementâ€ť for information as to ownership of Company securities by nominees for Director.

As set forth above under the â€śGovernance and Nominating Committeeâ€ť section, the Governance Committee annually reviews the composition of the Board and committees to ensure there is the proper combination of experience, qualifications, attributes and skills on the Board and that each committee is properly constituted to maximize its efficiency and effectiveness. In addition, the Governance Committee also annually reviews the criteria that the Governance Committee and the Board consider important for the totality of the Board to possess as well as the overall effectiveness of the Board and each committee. To that end, the Governance Committee seeks to populate the Board with a set of individuals that possess as many of such criteria as practicable. Although the pursuit of a Board where each Director meets all desirable criteria may be merely aspirational, the Governance Committee believes that it has assembled an exemplary group of leaders who do have the experience, qualifications, attributes and skills necessary to guide the Company to continued successes.

At a minimum, each Director should epitomize the Companyâ€™s Purpose and Values as set forth in its current Code of Ethics, as well as possess the highest ethics and integrity, and demonstrate a commitment to representing your interests. Each Director should also have the individual experiences that provide practical wisdom, mature judgment and an inquisitive and objective mind.

Therefore, in evaluating the nominees for submission to the consideration of our stockholders for the Annual Meeting, the Governance Committee evaluated each nominee against the set of criteria set forth above and concluded that each has and can be expected to continue to make significant and valuable contributions to the governance of the Company and the Governance Committee endorses their submission. The fact that we do not list a particular experience, skill, qualification or attribute for a Director does not mean that the Director does not possess a particular experience, skill, qualification or attribute.

All of our Directors have had, and many continue to have, successful careers. In accomplishing that success, each has demonstrated significant leadership skill, which includes a practical understanding of how large organizations operate, including the importance of human resource management, how employee and executive compensation is set, and an understanding of strategy and risk management.

The Board defines diversity to mean diversity of backgrounds, experience, expertise, perspectives and skills, along with the more traditional aspects of age, gender, and race. We believe that our Boardâ€™s diversity enhances the Companyâ€™s ability to achieve the Companyâ€™s objectives

All of our Director nominees are seasoned leaders that bring to the Board an array of private company, public company, government service, non-profit, social responsibility and other business experience.

Set forth below you will find certain information for each of the Directors, including the nominees that we believe evidence her or his qualifications to sit on the Board.

NOMINEES FOR ELECTION AS CLASS II DIRECTORS FOR A TERM ENDING 2016

Barbara D. Carlini is the Senior Vice President and Chief Information Officer of Dean Holding Company, the nationâ€™s largest dairy company, and has served in that position since June 2009. Prior to that, Ms. Carlini served as Chief Information Officer of Motorolaâ€™s Mobile Devices Division from May 2006 to January 2008. From November 2001 through March 2006, Ms. Carlini was the Chief Information Officer of Diageo, NA (formerly Guinness North America). Ms. Carliniâ€™s qualifications to serve on the Board include her diverse consumer products background, her substantial expertise in information technology and systems, her passion for corporate social responsibility and her overall organizational and leadership skills.

Hinda Miller served as a Vermont State Senator from 2003 to 2012. Ms. Miller is currently President of Sultana Group, a consulting firm specializing in leadership and entrepreneurship for women. From 1977 to 1996, Ms. Miller was co-founder of Jogbra Inc., an athletic apparel company, then President of Champion Jogbra, a division of Sara Lee Corporation. Ms. Millerâ€™s qualifications to serve on the Board include her experience gained in establishing and operating her own company, her overall leadership skills as a
legislator supporting economic development and entrepreneurship, as well as her comprehensive understanding of, and passion for, corporate social responsibility.

Norman H. Wesley is the former Chief Executive Officer and Chairman of Fortune Brands, Inc. Mr. Wesley joined Fortune Brands, Inc. in 1984. For more than ten years he led the office products unit, which Fortune Brands spun off to stockholders in 2005 before becoming the Chief Executive Officer of the home and hardware business of Fortune Brands, Inc. in 1997. He then became President and Chief Operating Officer of Fortune Brands in January 1999, and Chairman and Chief Executive Officer of Fortune Brands in December 1999. He served as Chief Executive Officer through December 2007, and remained Chairman until retiring in September 2008. Mr. Wesley began his career at Crown Zellerbach Corporation, where over a ten-year period he held various management positions, including Vice President and General Manager of the Office Products Group, before joining Fortune Brands, Inc. Mr. Wesley currently serves on the boards of ACCO Brands Corporation, Acuity Brands, Inc. and Fortune Brands Home & Security, Inc. Mr. Wesleyâ€™s qualifications to serve on the Board include his experience gained as President, Chief Executive Officer and Chairman of Fortune Brands, a public consumer products company.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF EACH OF THE THREE NOMINEES FOR ELECTION TO
THE BOARD AS CLASS II DIRECTORS

DIRECTORS CONTINUING IN OFFICE

Class I Directorsâ€”Term Ending 2015

Brian P. Kelley joined the Company as President, Chief Executive Officer and Director on December 3, 2012 from The Coca-Cola Company where he had been named President of Coca-Cola Refreshments in September 2012. He previously served as Chief Product Supply Officer, Coca Cola Refreshments since October 2010. Mr. Kelley joined Coca-Cola in 2007 as President and General Manager, Still Beverages and Supply Chain North America. In his role as President of Coca-Colaâ€™s North America Business Integration, he led the total integration of the acquisition of the North American assets of Coca-Cola Enterprises, combining Coca-Cola North America and Coca-Cola Enterprisesâ€™ North American operations into a new company, Coca-Cola Refreshments. Prior to Coca-Cola, Mr. Kelley was President and Chief Executive of SIRVA, Inc. (formerly North American Van Lines), a $3.7 billion leading provider of relocation solutions to a well-established and diverse customer base around the world. His earlier experience includes Ford Motor Company, where he was President of its $13 billion Lincoln/Mercury division and General Electric Company, GE Appliance Division where he held roles of increasing responsibility until named Vice President and General Manager, Sales and Distribution. Mr. Kelley began his career in sales at Procter & Gamble and over a period of years, worked his way up through brand management. Mr. Kelleyâ€™s qualifications to serve on the Board include his diverse senior management experience at several large, publicly-traded Fortune 100 companies, as well as the extensive supply chain, brand management and leadership experience he has obtained throughout his career.

Jules A. del Vecchio retired in November 2010 from his position as a First Vice President of New York Life Insurance Company where he was responsible for communications and agent management and training, a position he had since 1970. Mr. del Vecchioâ€™s qualifications to serve on the Board include his senior management and organizational experience as well as his extensive understanding of human resource engineering.

Robert P. Stiller , founder of the Company, served as its President and Chief Executive Officer since its inception in July 1981 through May 2007. From May 2007 through May 2012, Mr. Stiller served the Company as Chairman of the Board. Mr. Stillerâ€™s qualifications to serve on the Board include his extensive knowledge of the Company, as its founder, as well as his vision and foresight in understanding the trends in the marketplaces most affecting the Company.

Class III Directorsâ€”Term Ending 2014

Lawrence J. Blanford served as President and Chief Executive Officer of the Company from May 2007 through December 2012 and has served as a Director of the Company since May 2007. From May 2005 to October 2006, Mr. Blanford held the position of Chief Executive Officer at Royal Group Technologies Ltd., a Canadian building products and home improvements company. From January 2004 to May 2005, Mr. Blanford was Founder and President of Strategic Value Consulting, LLC, a consultancy firm. Prior to 2004, Mr. Blanford held various management positions with Royal Philips Electronics (North America), Maytag Corporation, Johns Manville Corporation, PPG Industries and The Procter & Gamble Company. Mr. Blanfordâ€™s qualifications to serve on the Board include his experience leading consumer products organizations in different industries, his strategic vision for growth, his commitment to corporate social responsibility, and his ability to achieve organizational goals marshaling resources around a compelling strategic imperative for quality results. Mr. Blanford currently also serves on the board of Steelcase, Inc.

A.D. David Mackay served as the Chief Executive Officer of Kellogg Company from December 31, 2006 through January 1, 2011 and as its President from August 2003 until retiring in January 2011. Prior to that experience, he served as the Chief Operating Officer of Kellogg from 2003 to 2006. He joined Kellogg Australia as Group Product Manager in 1985, serving in several positions with Kellogg USA, Kellogg Australia and Kellogg New Zealand before leaving Kellogg in 1992. He rejoined Kellogg Australia in 1998 as Managing Director and was appointed Managing Director of Kellogg United Kingdom and Republic of Ireland later in 1998. He was named Senior Vice President and President, Kellogg USA in July 2000, Executive Vice President in November 2000, and President and Chief Operating Officer in September 2003. Mr. Mackay is currently the Non-Executive Chairman of Beam, Inc., serves on the Board of Directors of Fortune Brands Home & Security, Inc., and Woolworths Ltd. He previously served as a Director of Kellogg Company and of Fortune Brands, Inc. Mr. Mackayâ€™s qualifications to serve on the Board, in addition to his rich consumer product background, includes his significant international experience to the Board, derived from his roles at Kellogg Australia, United Kingdom and Republic of Ireland, as well as his role as Managing Director of Sara Lee Bakery in Australia.

Michael J. Mardy is, and has been since December 2011, Executive Vice President, Chief Financial Officer and a Director of Tumi Holdings, Inc. and since 2003, Executive Vice President and Chief Financial Officer of Tumi, Inc., a retailer of prestige luggage and business accessories. Mr. Mardy is also a director of ModusLink Global Solutions, Inc. (formerly CMGI, Inc.), a supply chain technology company and is Chairman of its Audit Committee and a member of its Nominating and Corporate Governance Committee. Mr. Mardyâ€™s qualifications to serve on the Board include his extensive financial and accounting expertise (including his membership in the American Institute of Certified Public Accountants and the Financial Executive Institute) and leadership, the experience he has gained through service on the board of another public company, his consumer products experience in prior management positions and his overall leadership skills as a senior executive.

David E. Moran has been President of Marketing Driven Solutions, a marketing consulting firm focused on driving growth through innovation and brand building, since June 2005. Mr. Moran was Chief Executive Officer of Fusion5, a management consulting company, from July 1999 to June 2005. Mr. Moranâ€™s qualifications to serve on the Board include his extensive understanding of the Companyâ€™s business (including having spent four years at Maxwell House Coffee) and operations and his wide-ranging and comprehensive expertise in brand building, marketing strategy and leadership.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are a leader in the specialty coffee and coffeemaker businesses. We sell KeurigÂ® Single Cup brewers and roast high-quality Arabica bean coffees including single-origin, Fair Trade Certifiedâ„˘, certified organic, flavored, limited edition and proprietary blends offered in K-CupÂ® and VueÂ® packs ("portion packs") for use with our KeurigÂ® Single Cup brewers. We also offer traditional whole bean and ground coffee in other package types including bags, fractional packages and cans. In addition, we produce and sell other specialty beverages in portion packs including hot apple cider, hot and iced teas, iced coffees, iced fruit brews, hot cocoa and other dairy-based beverages.

Over the last several years the primary growth in the coffee industry has come from the specialty coffee category, including demand for single serve coffee which can now be enjoyed in a wide variety of places, including home, office, professional, restaurants, and hospitality locations. This growth has been driven by the emergence of specialty coffee shops throughout the U.S. and Canada, the general level of consumer knowledge of, and appreciation for, coffee quality and variety, and the wider availability of high-quality coffee. The Company has been benefiting from this overall industry trend in addition to what we believe to be our carefully developed and distinctive advantages over our competitors.

Our growth strategy involves developing and managing marketing programs to drive KeurigÂ® Single Cup brewer adoption in U.S. and Canadian households, food service and office locations in order to generate ongoing demand for portion packs and, in the longer term, globally. As part of this strategy, we work to sell our AH brewers at attractive price points which are approximately at cost, or sometimes at a loss when factoring in the incremental costs related to sales, in order to drive the sales of profitable portion packs. In addition, we have license agreements with Breville PTY Limited (producer of BrevilleÂ® brand coffeemakers), Jarden Consumer Solutions (producer of Mr. CoffeeÂ® brand coffeemakers), and Conair Corporation (producer of CuisinartÂ® brand coffeemakers), under which each produce, market and sell coffeemakers co-branded with KeurigÂ®.

The key elements of our business strategy are as follows:

â€˘
Growing the current KeurigÂ® Hot system in the U.S. and Canada;

â€˘
Expanding our brand offering, both owned and partner brands;

â€˘
Expanding in current channels;

â€˘
Launching new brewer technologies and innovation;

â€˘
Beginning international expansion.

In recent years, our growth has been driven predominantly by the growth and adoption of KeurigÂ® Single Cup Brewing systems, which include both the brewer and the related portion packs. In fiscal 2013, approximately 92% of our consolidated net sales were attributed to the combination of portion packs and KeurigÂ® Single Cup brewers and related accessories.

We believe the primary consumer benefits delivered by our KeurigÂ® Single Cup Brewing system are as follows:

1
Qualityâ€”expectations of the quality of coffee consumers drink have increased over the last several years and, we believe, with the KeurigÂ® system, consumers can be certain they will get a high-quality, consistently produced beverage every time.

2
Convenienceâ€”the KeurigÂ® system prepares beverages generally in less than a minute at the touch of a button with no mess, no fuss.

3
Choiceâ€”with many beverage brands across multiple beverage categories, GMCR offers more than 290 individual varieties, allowing consumers to enjoy and explore a wide range of beverages. In addition to a variety of brands of coffee and tea, we also produce and sell hot apple cider, iced teas, iced coffees, iced fruit brews, hot cocoa and other dairy-based beverages in portion packs.

We see these benefits as being our competitive advantage and believe it's the combination of these attributes that make the KeurigÂ® Single Cup Brewing system appealing to consumers.

We are focused on building our brands and profitably growing our business. We believe we can continue to grow sales by increasing consumer awareness in existing regions, expanding into new geographic regions, expanding consumer choice of coffee, tea and other beverages in our existing brewing systems or through the introduction of new brewing platforms, expanding sales in adjacent beverage industry segments and/or selectively pursuing other synergistic opportunities.

Our business relationships with participating brands are generally established through licensing or manufacturing arrangements.

Under licensing arrangements , we license the right to manufacture, distribute and sell the finished products through our distribution channels using the brand owners' marks. For the right to use a brand owner's mark, we may pay a royalty to the brand owner based on our sales of finished products that contain the brand owner's mark.

Under manufacturing arrangements , we manufacture finished beverage products using raw materials sourced by us or provided by the brand owner. In both instances, once the manufacturing process is complete, we sell the finished product either to the brand owner or to our customers. Under certain manufacturing arrangements, our sole customer is the brand owner and we are prohibited from selling the beverage products to other types of customers through our distribution channels. Under other manufacturing arrangements, in addition to manufacturing the beverage for sale to the brand owner, we have the right to sell the beverages using the brand owner's marks in certain of our channels through a licensing arrangement, as described above.

No individual licensing or manufacturing arrangement (including arrangements covering multiple brands) has generated net sales that have been significant to our consolidated net sales (i.e., no arrangement has accounted for more than 10% of our consolidated net sales in any period). We analyze the impact of each arrangement on consolidated net sales on an individual basis. We have determined that it is unlikely that we would lose our licensing or manufacturing rights to multiple brands at the same time. Each of our licensing and manufacturing arrangements are separately negotiated with unrelated parties, and each has distinct terms and conditions, including the duration of agreement and termination rights. Further, based upon the number of business relationships as well as the depth of our owned-brands, it is our belief that no individual business relationship is critical to the execution of our growth strategy.

We have continued to expand consumer choice in the KeurigÂ® Single Cup Brewing system by entering into or extending a number of business relationships which enable us to offer other strong national and regional coffee and tea brands, and store brands such as Dunkin' Donuts TM , Seattle's Best CoffeeÂ®, StarbucksÂ®, The Coffee Bean & Tea LeafÂ® , CinnabonÂ®, TazoÂ®, Eight O'ClockÂ®, TetleyÂ®, Good EarthÂ®, SnappleÂ®, Kirkland Signature TM and METRO's Irresistibles K-CupÂ® packs for use with KeurigÂ® Single Cup brewers. We also continue to examine opportunities for business relationships with other strong national/regional brands including the potential for adding premium store-brand or co-branded portion packs to create additional single serve products that will help augment consumer demand for the KeurigÂ® Single Cup Brewing systems. Furthermore, we are expanding the use of our KeurigÂ® Single Cup Brewing system beyond beverages through innovative partnerships, the first of which is with the Campbell Soup Company to produce Campbell's Fresh-Brewed Soup K-CupÂ® packs which will be made available in fiscal 2014. We believe these new product offerings fuel excitement for current Keurig owners and users; raise system awareness; attract new consumers to the system; and promote expanded use of the system. These relationships are established with careful consideration of potential economics and with the expectation that they will lead to increased KeurigÂ® Single Cup Brewing system awareness and household adoption, in part through the participating brand's advertising and merchandising activities.

For fiscal 2013, the Company's net sales of $4,358.1 million represented growth of 13% over fiscal 2012. Approximately 92% of our fiscal 2013 consolidated net sales were attributed to the combination of portion packs and KeurigÂ® Single Cup brewers and related accessories. Gross profit for fiscal 2013 was $1,619.4 million, or 37.2% of net sales, as compared to $1,269.4 million, or 32.9% of net sales, in fiscal 2012. Fiscal 2013, selling, operating, and general and administrative expenses ("SG&A") increased 22% to $854.2 million from $700.5 million in fiscal 2012. As a percentage of sales, SG&A expenses increased to 19.6% in fiscal 2013 from 18.2% in fiscal 2012. Our operating margin improved to 17.6% in fiscal 2013 from 14.7% in fiscal 2012.

We continually monitor all costs, including coffee, as we review our pricing structure, as cyclical swings in commodity markets are common. The recent years have seen significant volatility in the "C" price of coffee (i.e. the price per pound quoted by the Intercontinental Exchange). We expect coffee prices to remain volatile in the coming years. To help mitigate this volatility, we generally fix the price of our coffee contracts for approximately three fiscal quarters, and at times four fiscal quarters, prior to delivery so that we have the ability to adjust our sales prices to marketplace conditions if required.

We offer a one-year warranty on all KeurigÂ® Single Cup brewers we sell and provide for the estimated cost of product warranties, primarily using historical information and current repair or replacement costs, at the time product revenue is recognized. In addition, sales of KeurigÂ® Single Cup brewers are recognized net of an allowance for returns using an average return rate based on historical experience and an evaluation of contractual rights or obligations. We focus some of our research and development efforts on improving brewer reliability, strengthening our quality controls and product testing procedures. As we have grown, we have added significantly to our product testing, quality control infrastructure and overall quality processes. As we continue to innovate, and our products become more complex, both in design and componentry, product performance may modulate, causing warranty or sales returns rates to possibly fluctuate going forward. As a result, future warranty claims rates may be higher or lower than we are currently experiencing and for which we are currently providing for in our warranty or sales return reserves.

We generated $836.0 million in cash from operations during fiscal 2013 as compared to $477.8 million in fiscal 2012. During fiscal 2013, we primarily used cash generated from operations to reduce our borrowings under long-term debt obligations by $297.8 million, fund capital expenditures of $232.8 million and repurchase shares of our common stock of $188.3 million.

We consistently analyze our short-term and long-term cash requirements to continue to grow the business. We expect that most of our cash generated from operations will continue to be used to fund capital expenditures and the working capital required for our growth over the next few years.

Business Segments

We have historically managed our operations through three business segments: the Specialty Coffee business unit ("SCBU"), the Keurig business unit ("KBU") and the Canadian business unit. Effective as of and as initially disclosed on May 8, 2013, our Board of Directors authorized a reorganization which consolidated U.S. operations to bring greater organizational efficiency and coordination across the Company. Due to this combination, the results of U.S. operations, formerly reported in the SCBU and KBU segments, are reported in the Domestic segment and the results of Canadian operations are in the "Canada" segment. As a result of the consolidation of U.S. operations, we have recast all historical segment results in order to provide data that is on a basis consistent with our new structure. See Note 4, Segment Reporting , of the Notes to Consolidated Financial Statements included in this Annual Report.

We evaluate the performance of our operating segments based on several factors, including net sales to external customers and operating income. Net sales are recorded on a segment basis and intersegment sales are eliminated as part of the financial consolidation process. Operating income represents gross profit less selling, operating, general and administrative expenses. Our manufacturing operations occur within both the Domestic and Canada segments, and the costs of manufacturing are recognized in cost of sales in the operating segment in which the sale occurs. Information system technology services are mainly centralized while finance and accounting functions are primarily decentralized. Expenses consisting primarily of compensation and depreciation related to certain centralized administrative functions including information system technology are allocated to the operating segments. Expenses not specifically related to an operating segment are presented under "Corporateâ€”Unallocated." Corporateâ€”Unallocated expenses are comprised mainly of the compensation and other related expenses of certain of our senior executive officers and other selected employees who perform duties related to the entire enterprise. Corporate Unallocated expenses also include depreciation for corporate headquarters, sustainability expenses, interest expense not directly attributable to an operating segment, the majority of foreign exchange gains or losses, certain corporate legal expenses and compensation of the Board of Directors.

Effective for the first quarter of fiscal 2013, we changed our measure for reporting segment profitability and for evaluating segment performance and the allocation of our resources from income before taxes to operating income (loss). Prior to the first quarter of fiscal 2013, we disclosed each operating and reporting segment's income before taxes to report segment profitability. Segment disclosures for prior periods have been recast to reflect operating income by segment in place of income before taxes.

Effective with the beginning of the Company's third quarter of fiscal 2011, sales between operating segments are recorded at cost. As a result, intersegment sales, beginning with the third quarter of fiscal 2011, have no impact on segment operating income (loss). Each operating segment's net sales for fiscal years 2013, 2012 and 2011 include only net sales to external customers.

Basis of Presentation

Included in this presentation are discussions and reconciliations of income before taxes, net income and diluted earnings per share in accordance with accounting principles generally accepted in the United States of America ("GAAP") to income before taxes, net income and diluted earnings per share excluding certain expenses and losses. We refer to these performance measures as non-GAAP net income and non-GAAP net income per share. These non-GAAP measures exclude transaction expenses related to our acquisitions including the foreign exchange impact of hedging the risk associated with the Canadian dollar purchase price of the Van Houtte acquisition; any gain from the sale of Filterfresh U.S. based coffee services business including the effect of any tax benefits resulting from the use of net operating and capital loss carryforwards as a result of the Filterfresh sale; legal and accounting expenses related to the SEC inquiry and pending litigation; and non-cash related items such as amortization of identifiable intangibles and loss on extinguishment of debt, each of which include adjustments to show the tax impact of excluding these items. Each of these adjustments was selected because management uses these non-GAAP measures in discussing and analyzing its results of operations and because we believe the non-GAAP measures provide investors with greater transparency by helping to illustrate the underlying financial and business trends relating to our results of operations and financial condition and comparability between current and prior periods. For example, we excluded acquisition-related transaction expenses because these expenses can vary from period to period and transaction to transaction and expenses associated with these activities are not considered a key measure of our operating performance.

We use the non-GAAP measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company. These non-GAAP measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute or superior to, the other measures of financial performance prepared in accordance with GAAP. Using only the non-GAAP financial measures to analyze our performance would have material limitations because their calculation is based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. We compensate for these limitations by presenting both the GAAP and non-GAAP measures of its results.

Acquisitions and Divestitures

On October 3, 2011, we sold all the outstanding shares of Van Houtte USA Holdings, Inc., also known as the Van Houtte U.S. Coffee Service business, or "Filterfresh" business, to ARAMARK Refreshment Services, LLC ("ARAMARK") in exchange for $149.5 million in cash. Approximately $4.4 million of cash was transferred to ARAMARK as part of the sale and $7.4 million was repaid to ARAMARK upon finalization of the purchase price, resulting in a net cash inflow related to the Filterfresh sale of $137.7 million.

On December 17, 2010, we acquired the Van Houtte business through the purchase of all of the outstanding capital stock of LJVH Holdings, Inc., a coffee roaster headquartered in Montreal, Quebec, for $907.8 million, net of cash acquired. The acquisition was financed with cash on hand and the Company's credit facility.

Van Houtte is reported in the Canada segment, as was Filterfresh, prior to being sold.

Summary Financial Data of the Company

Our fiscal year ends on the last Saturday in September. Fiscal years 2013, 2012 and 2011 represent the years ended September 28, 2013, September 29, 2012 and September 24, 2011, respectively. Fiscal 2013 and 2011 consist of 52 weeks, and fiscal 2012 consists of 53 weeks.

Segment Summary

Revenue

Company Summary

53rd Week

Fiscal 2012 had an additional week of sales (53rd week) due the fact that our fiscal year ends the last Saturday of each September. The 53rd week increased fiscal 2012 net sales by approximately $90.0 million and net income by approximately $11.0 million (net of income taxes of $5.8 million), or $0.07 per share.

Fiscal 2013

Net sales for fiscal 2013 increased 13% to $4,358.1 million, up from $3,859.2 million reported in fiscal 2012. The primary drivers of the increase in the Company's net sales were a 18%, or $478.4 million, increase in portion pack net sales, a 9%, or $67.8 million, increase in KeurigÂ® Single Cup Brewer and accessories sales, offset by a 12%, or $47.3 million, net decrease in other products and royalties primarily by a demand shift from coffee sold in traditional package formats to portion packs. Net sales for fiscal 2013 as compared to fiscal 2012 were not materially affected by fluctuations in foreign currency exchange rates.

The increase in portion pack net sales was driven primarily by a 22 percentage point increase in sales volume, offset by a 3 percentage point reduction due to portion pack product mix and a 1 percentage point decrease in portion pack net price realization.

Fiscal 2012

Net sales for fiscal 2012 increased 46% to $3,859.2 million, up from $2,650.9 million reported in fiscal 2011. The primary drivers of the increase in the Company's net sales were a 59%, or $1,004.9 million, increase in portion pack net sales, a 45%, or $235.1 million, increase in KeurigÂ® Single Cup Brewer and accessories sales, offset by a 8%, or $31.7 million, net decrease in other products primarily as a result of the sale of Filterfresh. Net sales for fiscal 2012 as compared to fiscal 2011 were not materially affected by fluctuations in foreign currency exchange rates.

The increase in portion pack net sales was driven by a 49 percentage point increase in portion pack sales volume, a 9 percentage point increase in K-CupÂ® pack net price realization due primarily to price increases implemented during fiscal 2011 to offset the then higher green coffee and other input costs, and a 2 percentage point increase in K-CupÂ® pack net sales due to the acquisition of Van Houtte. These increases in portion pack net sales were offset by a 1 percentage point reduction due to portion pack product mix.

Domestic

Fiscal 2013

The Domestic segment net sales increased by $491.3 million, or 15%, to $3,725.0 million in fiscal 2013 as compared to $3,233.7 million in fiscal 2012. The increase is due primarily to a $438.6 million, or 18%, increase related to sales of portion packs and a $60.9 million, or 9%, increase related to sales of brewers and accessories.

Fiscal 2012

Domestic segment net sales increased by $1,081.3 million or 50%, to $3,233.7 million in fiscal 2012 as compared to $2,152.4 million in fiscal 2011. The increase is due primarily to a $922.4 million, or 61%, increase related to sales of K-CupÂ® and VueÂ® packs and a $187.5 million, or 39%, increase related to sales of KeurigÂ® Single Cup brewers and accessories.

Canada

Fiscal 2013

Canada segment net sales increased by $7.6 million, or 1%, to $633.1 million in fiscal 2013 as compared to $625.5 million in fiscal 2012. The increase in net sales, excluding a $9.2 million, or 1.5%, decrease related to the unfavorable impact of foreign currency exchange rates, is due primarily to (i) a $44.9 million, or 16%, increase related to the sale of portion packs, partially offset by a $35.8 million, or 14%, decrease in sales of other products, such as coffee sold in traditional package formats, driven by a demand shift from coffee sold in traditional package formats to portion packs, and (ii) a $7.7 million, or 8%, increase related to sales of KeurigÂ® Single Cup brewers and accessories.

Fiscal 2012

For fiscal 2012, Canada segment net sales were $625.5 million as compared to $498.5 million in fiscal 2011. The increase is due to a $98.6 million, or 57%, increase related to the sale of portion packs, a $47.6 million, or 103%, increase related to sales of KeurigÂ® Single Cup brewers and accessories, and a $71.7 million, or 38%, increase related to other products, partially offset by a $90.9 million decrease due to the sale of Filterfresh on October 3, 2011. These increases and decrease include the unfavorable impact of foreign currency exchange rates which reduced net sales by approximately 0.7%.

Gross Profit

Fiscal 2013

Gross profit for fiscal 2013 was $1,619.4 million, or 37.2% of net sales, as compared to $1,269.4 million, or 32.9% of net sales, in fiscal 2012. Gross margin increased approximately (i) 290 basis points due to lower green coffee costs, (ii) 100 basis points due to lower labor and overhead manufacturing costs, (iii) 80 basis points due to a decrease in warranty expense related to the KeurigÂ® Single Cup brewers in fiscal 2013, as compared to the prior year, and (iv) 60 basis points due to lower sales returns primarily related to KeurigÂ® Single Cup brewers. The increase in gross margin was partially offset by a 100 basis point decrease due to net price realization.

Fiscal 2012

Gross profit for fiscal 2012 was $1,269.4 million, or 32.9% of net sales as compared to $904.6 million, or 34.1% of net sales, in fiscal 2011. Gross margin declined approximately (i) 220 basis points due to higher labor and overhead manufacturing costs associated with the ramp-up in our manufacturing base, (ii) 80 basis points due to higher green coffee costs, (iii) 70 basis points due to a higher write down of inventories, including finished goods and raw materials, due to lower than anticipated sales of seasonal and certain coffee products, and (iv) 50 basis points due to the launch of our new KeurigÂ® VueÂ® Brewing system that has a lower gross margin than the KeurigÂ® K-CupÂ® Brewing system. The decrease in gross margin was partially offset by (i) a 260 basis point increase due to net price realization primarily from price increases taken in fiscal 2011 to offset higher green coffee and other input costs that were experienced in fiscal 2011 and the first half of fiscal 2012, and (ii) a 40 basis point increase due to the decrease in fiscal 2012 warranty expense related to KeurigÂ® Single Cup brewers.

Selling, General and Administrative Expenses

Fiscal 2013

Selling, operating, and general and administrative ("SG&A") expenses increased 22% to $854.2 million in fiscal 2013 from $700.5 million in fiscal 2012. As a percentage of sales, SG&A expenses increased to 19.6% in fiscal 2013 from 18.2% in the prior year period, due to additional brand support through marketing activities and increased expenditures to support infrastructure and planned product introductions. The increase in SG&A expenses over the prior year period is primarily attributed to increases of $60.4 million in marketing and sales related expenses, $16.0 million in research and development expenses, and increases in general and administrative expenses, primarily $23.4 million in incentive compensation and $19.7 million in salaries associated with building infrastructure to support the business.

Fiscal 2012

SG&A expenses increased 31% to $700.5 million in fiscal 2012 from $535.7 million in fiscal 2011. As a percentage of sales, SG&A expenses improved to 18.2% in fiscal 2012 from 20.2% in fiscal 2011.

SG&A expenses for fiscal 2012 included a full year with the Van Houtte acquisition as compared to approximately nine months in fiscal 2011. This resulted in an increase in SG&A expenses of approximately $30.0 million, which was offset by a decrease in SG&A expenses of $21.4 million as a result of the sale of Filterfresh on October 3, 2011. In addition, fiscal 2012 included a 53rd week which increased SG&A expenses by approximately $11.5 million. Inclusive of the acquisition of Van Houtte, the sale of Filterfresh and the 53rd week in fiscal 2012, SG&A expenses increased primarily due to (i) $66.1 million of additional advertising and certain marketing expenses, (ii) $30.9 million of additional salaries and related expenses, (iii) $13.8 million of additional sustainability expenses, (iv) $7.7 million of additional consulting expenses, and (v) $7.0 million of additional depreciation expense. The increase in SG&A expenses was partially offset by a decrease in fiscal 2011 in general and administrative expenses of $10.6 million in transaction-related expenses primarily due to the Van Houtte acquisition and $1.2 million in legal and accounting expenses associated with the SEC inquiry and pending litigation.

Gain (Loss) on Financial Instruments

Fiscal 2013

We incurred $5.5 million in net gains on financial instruments not designated as hedges for accounting purposes during fiscal 2013 as compared to $4.9 million in net losses during fiscal 2012. For fiscal 2013, the net gains were primarily attributable to the fair value adjustment of our cross currency swap, which hedges the risk in currency movements on an intercompany note denominated in Canadian currency.

Fiscal 2012

We incurred $4.9 million in net losses on financial instruments not designated as hedges for accounting purposes during fiscal 2012 as compared to $6.2 million in net losses during fiscal 2011. For fiscal 2012, the net losses were primarily attributable to the fair value adjustment of our cross currency swap, which hedges the risk in currency movements on an intercompany note denominated in Canadian currency. For fiscal 2011, we incurred net losses of approximately $3.2 million in derivative instruments that were used to hedge the Canadian dollar purchase price of the Van Houtte acquisition and a $2.3 million net loss on the fair value adjustment on our cross currency swap

Foreign Currency Exchange Gain (Loss), Net

We have certain assets and liabilities that are denominated in foreign currencies. During fiscal 2013, we incurred a net foreign currency loss of approximately $12.6 million as compared to a net gain of $7.0 million during fiscal 2012. The net foreign currency exchange gains and losses primarily related to re-measurement of our alternative currency revolving credit facility and certain intercompany notes with our foreign subsidiaries.

Gain on Sale of Subsidiary

On October 3, 2011, we sold all the outstanding shares of the Filterfresh business resulting in a gain of $26.3 million.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview

We are a leader in the specialty coffee and coffeemaker businesses. We sell Keurig Â® Single Cup Brewers and roast high-quality Arabica bean coffees including single-origin, Fair Trade Certified â„˘ , certified organic, flavored, limited edition and proprietary blends offered in K-Cup Â® and Vue Â® packs (â€śsingle serve packsâ€ť) for use with our Keurig Â® Single Cup Brewers. We also offer traditional whole bean and ground coffee in other package types including bags, fractional packages and cans. In addition, we produce and sell other specialty beverages in single serve packs including hot and iced teas, iced coffees, hot and iced fruit brews, hot cocoa and other dairy-based beverages. The brands include:

Over the last several years the primary growth in the coffee industry has come from the specialty coffee category, including demand for single cup specialty coffee which can now be enjoyed in a wide variety of locations, including home, office, professional locations, restaurants, hospitality and specialty coffee shops. This growth has been driven by the emergence of specialty coffee shops throughout North America, the general level of consumer knowledge of, and appreciation for, coffee quality and variety, and the wider availability of high-quality coffee. We have been benefiting from this overall industry trend in addition to what we believe to be our carefully developed and distinctive advantages over our competitors.

Our growth strategy involves developing and managing marketing programs to drive Keurig Â® Single Cup Brewer adoption in North American households and offices in order to generate ongoing demand for single serve packs and, in the long-term, globally. As part of this strategy, we work to sell our at-home (â€śAHâ€ť) brewers at attractive price points which are approximately at cost, or sometimes at a loss when factoring in the incremental costs related to sales, in order to drive the sales of profitable single serve packs. In addition, we have license agreements with Breville PTY Limited (producer of Breville Â® brand coffeemakers), Jarden Consumer Solutions (producer of Mr. Coffee Â® brand coffeemakers), and Conair Corporation (producer of Cuisinart Â® brand coffeemakers), under which each produce, market and sell coffeemakers co-branded with Keurig Â® .

In recent years, our growth has been driven predominantly by the growth and adoption of Keurig Â® Single Cup Brewing systems which includes both the K-Cup Â® and the Vue Â® brewers and related single serve packs. In the third fiscal quarter of 2013, approximately 91% of our consolidated net sales were attributed to the combination of single serve packs and Keurig Â® Single Cup Brewers and related accessories.

We regularly conduct consumer surveys to better understand our consumersâ€™ preferences and behaviors. In Company surveys, we have learned that consumers prefer our Keurig Â® Single Cup Brewing systems for three main reasons (which we see as our competitive advantages):

1
Qualityâ€”expectations of the quality of coffee consumers drink has increased over the last several years and, we believe, with the Keurig Â® system, consumers can be certain they will get a high-quality, consistently produced beverage every time.

2
Convenienceâ€”the Keurig Â® system prepares beverages generally in less than a minute at the touch of a button with no mess, no fuss.

3
Choiceâ€”with many single serve beverage brands across multiple beverage categories, GMCR offers more than 225 individual varieties, allowing consumers to enjoy and explore a wide range of beverages. In addition to a variety of brands of coffee and tea, we also produce and sell iced teas, iced coffees, hot and iced fruit brews, hot cocoa and other dairy-based beverages, in single serve packs.

We believe itâ€™s the combination of these attributes that make the Keurig Â® Single Cup Brewing systems so appealing to so many consumers.

We are focused on building our brands and profitably growing our business. We believe we can continue to grow sales by increasing consumer awareness in existing regions, expanding into new geographic regions, expanding consumer choice of coffee, tea and other beverages in our existing brewing systems or through the introduction of new brewing platforms, expanding sales in adjacent beverage industry segments and/or selectively pursuing other synergistic opportunities.

We have continued to expand consumer choice in the system by entering into a number of business relationships which enable us to offer other strong national and regional coffee and tea brands such as Folgers Â® , Millstone Â® , Dunkinâ€™ Donuts â„˘ , Seattleâ€™s Best Coffee Â® , Starbucks Â® coffee, The Coffee Bean & Tea Leaf Â® coffee, Cinnabon Â® bakery-inspired coffee, Tazo Â® tea, Eight Oâ€™Clock Â® coffee, Tetley Â® tea, Good Earth Â® tea, Lipton Â® and Snapple Â® teas in single serve packs for use with Keurig Â® Single Cup Brewers. We also continue to examine opportunities for business relationships with other strong national/regional brands including the potential for adding premium store-brand or co-branded single serve packs to create additional single serve products that will help augment consumer demand for the Keurig Â® Single Cup Brewing systems. For example, in May 2013, we announced we are partnering with International Coffee and Tea, LLC to make The Coffee Bean & Tea Leaf Â® brand available in K-Cup Â® packs for the Keurig Â® Single Cup Brewing system. We believe these new product offerings fuel excitement for current Keurig Â® owners and users; raise system awareness; attract new consumers to the system; and promote expanded use of the system. These relationships were established with careful consideration of potential economics and with the expectation that these relationships will lead to increased Keurig Â® Single Cup Brewing system awareness and household adoption through the participating brandâ€™s advertising and merchandising activities.

Our business relationships with participating brands are generally established through licensing or manufacturing arrangements.

Under licensing arrangements , we license the right to manufacture, distribute and sell the finished products through our distribution channels using the brand ownersâ€™ marks. For the right to use a brand ownerâ€™s mark, we pay a royalty to the brand owner based on our sales of finished products that contain the brand ownerâ€™s mark.

Under manufacturing arrangements , we manufacture finished beverage products using raw materials sourced by us or provided by the brand owner. In both instances, once the manufacturing process is complete, we sell the finished product either to the brand owner or to our customers. Under certain manufacturing arrangements, our sole customer is the brand owner and we are prohibited from selling the beverage products to other types of customers through our distribution channels. Under other manufacturing arrangements, in addition to manufacturing the beverage for sale to the brand owner, we have the right to sell the beverages using the brand ownerâ€™s marks in certain of our channels through a licensing arrangement, as described above.

No individual licensing or manufacturing arrangement (including arrangements covering multiple brands) has generated net sales that have been significant to our consolidated net sales (i.e., no arrangement has accounted for more than 10% of our consolidated net sales in any period). We analyze the impact of each arrangement on consolidated net sales on an individual basis. We have determined that it is unlikely that we would lose our licensing or manufacturing rights to multiple brands at the same time. Each of our licensing and manufacturing arrangements are separately negotiated with unrelated parties, and each has distinct terms and conditions, including the duration of agreement and termination rights. Further, based upon the number of business relationships as well as the depth of our owned-brands, it is our belief that no individual business relationship is critical to the execution of our growth strategy.

We are also focused on continued innovation with our owned-brands, both in single serve brewing systems and other single serve beverages. Some of our recent initiatives include:

â€˘ Expanding the Keurig Â® brewing platforms with introduction of a new commercial grade Keurig Â® Bolt â„˘ Carafe Brewing System which, following in-office testing, will be available throughout the U.S. and Canada through limited Keurig Authorized Distributors beginning in late fall of calendar 2013;

â€˘
An expansion of our Keurig Â® Single Cup Brewing system to include Keurig Â® Vue Â® brewers and related Vue Â® packs; and

Management is focused on executing our growth strategy to drive Keurig Â® Single Cup Brewer adoption in North American households and offices in order to generate ongoing demand for single serve packs.

We compete not only with other widely advertised branded products, but also with private label or generic products that generally are sold at lower prices. In September 2012, two patents associated with our K-Cup Â® packs expired, and certain third parties have launched competing products. Currently, we anticipate that the total of all unlicensed portion packs will represent roughly 5% to 15% of the system demand, starting at the lower end of the range in 2013.

For the third fiscal quarter of 2013, our net sales of $967.1 million represented growth of 11% over the third fiscal quarter of 2012 (â€śthe prior year periodâ€ť). Gross profit for the third fiscal quarter of fiscal 2013 was $407.6 million, or 42.1% of net sales, as compared to $303.3 million, or 34.9% of net sales for the prior year period. For the third fiscal quarter of 2013, selling, operating, and general and administrative expenses (â€śSG&Aâ€ť) increased 23.4% to $214.3 million from $173.6 million for the prior year period. As a percentage of sales, SG&A expenses increased to 22.2% in the third fiscal quarter of 2013 from 20.0% in the prior year period. Our operating margin improved to 20.0% in the third fiscal quarter of 2013 from 14.9% in the prior year period.

We continually monitor all costs, including coffee, as we review our pricing structure as cyclical swings in commodity markets are common. The recent years have seen significant volatility in the â€śCâ€ť price of coffee (i.e., the price per pound quoted by the Intercontinental Exchange). We expect coffee prices to remain volatile in the coming years. To help mitigate this volatility, we generally fix the price of our coffee contracts for approximately three fiscal quarters, and at times four fiscal quarters, prior to delivery so that we have the ability to adjust our sales prices to marketplace conditions if required.

We offer a one-year warranty on all Keurig Â® Single Cup Brewers we sell and provide for the estimated cost of product warranties, primarily using historical information and current repair or replacement costs, at the time product revenue is recognized. In addition, sales of Keurig Â® Single Cup Brewers are recognized net of an allowance for returns using an average return rate based on historical experience and an evaluation of contractual rights or obligations. We focus some of our research and development efforts on improving brewer reliability, strengthening its quality controls and product testing procedures. As we have grown, we have added significantly to our product testing, quality control infrastructure and overall quality processes. As we continue to innovate, and our products become more complex, both in design and componentry, product performance may modulate, causing warranty or sales returns rates to possibly fluctuate going forward. As a result, future warranty claims rates may be higher or lower than we are currently experiencing and for which we are currently providing for in our warranty or sales return reserves.

We generated $772.2 million in cash from operating activities during the thirty-nine weeks ended June 29, 2013 as compared to $488.2 million during the thirty-nine weeks ended June 23, 2012. During the thirty-nine weeks ended June 29, 2013 we primarily used cash generated from operating activities to reduce our borrowings under long-term debt obligations by $232.9 million, fund capital expenditures of $190.4 million and repurchase shares of our common stock for $125.7 million.

We consistently analyze our short-term and long-term cash requirements to continue to grow the business. We expect that most of our cash generated from operations will continue to be used to fund capital expenditures and the working capital required for our growth over the next few years.

Business Segments

We have historically managed our operations through three business segments: the Specialty Coffee business unit (â€śSCBUâ€ť), the Keurig business unit (â€śKBUâ€ť) and the Canadian business unit. Effective as of and as initially disclosed on May 8, 2013, our Board of Directors authorized a reorganization which consolidated U.S. operations to bring greater organizational efficiency and coordination across the Company. Due to this combination, the results of U.S. operations, formerly reported in the SCBU and KBU segments, are reported in the Domestic segment and the results of Canadian operations are in the â€śCanadaâ€ť segment. See Note 4, Segment Reporting , of the Notes to Unaudited Consolidated Financial Statements included in this Quarterly Report.

We evaluate the performance of our operating segments based on several factors, including net sales to external customers and operating income. Net sales are recorded on a segment basis and intersegment sales are eliminated as part of the financial consolidation process. Operating income represents gross profit less selling, operating, general and administrative expenses. Our manufacturing operations occur within both the Domestic and Canada segments, and the costs of manufacturing are recognized in cost of sales in the operating segment in which the sale occurs. Information system technology services are mainly centralized while finance and accounting functions are primarily decentralized. Expenses consisting primarily of compensation and depreciation related to certain centralized administrative functions including information system technology are allocated to the operating segments. Expenses not specifically related to an operating segment are presented under â€śCorporate Unallocated.â€ť Corporate Unallocated expenses are comprised mainly of the compensation and other related expenses of certain of our senior executive officers and other selected employees who perform duties related to the entire enterprise. Corporate Unallocated expenses also include depreciation for corporate headquarters, corporate social responsibility expenses, interest expense not directly attributable to an operating segment, the majority of foreign exchange gains or losses, certain corporate legal expenses and compensation of the Board of Directors.

Effective for the first quarter of fiscal 2013, we changed our measure for reporting segment profitability and for evaluating segment performance and the allocation of our resources from income before taxes to operating income (loss). Prior to the first quarter of fiscal 2013, we disclosed each operating and reporting segmentâ€™s income before taxes to report segment profitability. Segment disclosures for prior periods have been recast to reflect operating income by segment in place of income before taxes.

Basis of Presentation

Included in this presentation are discussions and reconciliations of net income and diluted earnings per share in accordance with accounting principles generally accepted in the United States of America (â€śGAAPâ€ť) to net income and diluted earnings per share excluding certain expenses and losses. We refer to these performance measures as non-GAAP net income and non-GAAP net income per share. These non-GAAP measures exclude transaction expenses related to the gain from the sale of Van Houtte USA Holdings, Inc., also known as the Van Houtte U.S. Coffee Service business, or â€śFilterfresh,â€ť including the effect of any tax benefits resulting from the use of net operating and capital loss carryforwards as a result of the Filterfresh sale; legal and accounting expenses related to the Securities and Exchange Commission (â€śSECâ€ť) inquiry and pending securities and stockholder derivative class action litigation; and non-cash acquisition-related items such as amortization of identifiable intangibles, each of which include adjustments to show the tax impact of excluding these items. Each of these adjustments was selected because management uses these non-GAAP measures in discussing and analyzing its results of operations and because we believe the non-GAAP measures provide investors with greater transparency by helping to illustrate the underlying financial and business trends relating to our results of operations and financial condition and comparability between current and prior periods. For example, we excluded acquisition-related transaction expenses because these expenses can vary from period to period and transaction to transaction and expenses associated with these activities are not considered a key measure of our operating performance.

We use the non-GAAP measures to establish and monitor budgets and operational goals and to evaluate our performance. These non-GAAP measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute or superior to, the other measures of financial performance prepared in accordance with GAAP. Using only the non-GAAP financial measures to analyze our performance would have material limitations because their calculation is based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. We compensate for these limitations by presenting both the GAAP and non-GAAP measures of its results.

Divestiture

On October 3, 2011, all the outstanding shares of Filterfresh were sold to ARAMARK Refreshment Services, LLC (â€śARAMARKâ€ť) in exchange for $149.5 million in cash. Approximately $4.4 million of cash was transferred to ARAMARK as part of the sale and $7.4 million was repaid to ARAMARK upon finalization of the purchase price, resulting in a net cash inflow related to the Filterfresh sale of $137.7 million.

Prior to October 3, 2011, Filterfresh was reported in our Canada segment.

CONF CALL

Suzanne DuLong - VP, Investor Relations and Corporate Communications
Thank you, Amber, and welcome, everyone. Todayâ€™s press release is available on our website at gmcr.com. Our Form 10-K for the period has been filed and is also available on our website.

On todayâ€™s call Brian Kelley, our President and CEO will provide some brief introductory remarks. Fran Rathke, our CFO, will discuss aspects of the quarterâ€™s financial results as well as our outlook for our current quarter and fiscal year 2014. Brian will then provide some additional commentary about the business. Weâ€™ll then open the call to questions from the sell-side analysts.

With us for the Q&A session are T.J. Whalen, Chief Strategy and Sustainability Officer; and John Whoriskey, President of U.S. Sales. To ensure weâ€™ve the opportunity to address everyoneâ€™s questions during the time we have allotted for this call, we ask that you limit yourself to one question. We will revisit the question queue for follow-up questions if time permits.

Finally, Iâ€™ll remind everyone that certain statements will be made today which are forward-looking within the meaning of securities laws. Owing to the uncertainties of forward-looking statements, our actual results may differ materially from anything projected in these forward-looking statements. We can give no assurance as to the accuracy and we assume no obligation to update them. For further information on risks and uncertainties, please read the Companyâ€™s SEC filings and the paragraph in todayâ€™s press release that begins with the word â€ścertain informationâ€ť.

And now, Iâ€™ll turn the call over to Brian Kelley.

Brian Kelley - President and CEO
Thanks, Suzanne and good afternoon everyone. Before I get started, I will remind listeners that our fourth quarter and fiscal year 2012 contained a 14th and 53rd week respectively. For comparative purposes our comments today will exclude the impact of the extra week of fiscal 2012 on our financials unless otherwise noted.

Now onto our performance. We had very strong end to an excellent year, driven by continued consumer passion for the Keurig brewing system. Our 16% revenue growth for the year and 22% growth for the quarter were driven by robust brewer sales and continued momentum in portion packs. For the year our revenue growth of 16% was above our guidance and in line with our long-term growth model. In Q4 we grew revenue by 22%, non-GAAP operating profit by 36% and non-GAAP earnings per share by 56%, an excellent quarter in all.

Portion pack unit shipments grew 29% in the fourth quarter and our customersâ€™ sell-through of portion packs was consistent with our shipments for both the fourth quarter and the full year and in line with our estimates of the growth of our U.S at home install brewer base.

As we enter the holiday season, we believe retailers brewer inventory is at seasonally appropriate levels to be able to satisfy anticipated consumer demand. We continue to make meaningful gross margin progress in the quarter as we have throughout the year. Continued operating margin improvement led to non-GAAP EPS growth of 45% for the full year and 56% growth for the quarter.

Importantly free cash flow generation was excellent, at $603 million, nearly eight times last yearâ€™s $77 million. Our results for the year and the quarter illustrate the strength of our business model, the healthy fundamentals at the foundation of the Keurig system and our continued operational execution.